Please scroll down for today’s crony capitalist commentary
Today, our Aussie Oil & Gas energy analyst friend observes that, “Overnight Repsol announced an onshore discovery of 1.3 B bbls – the largest in the US for 30 years. This follows on from similar sized discoveries in the State last year in the immediate offshore. Unfortunately prices will likely need to solidly hold above US$50 before these will be developed in this high cost (and high tax) location.”
We refer readers to the view of some that taxes do not affect investment. This includes liberal legislators and their consultant, and the Governor who on the one hand complemented Repsol for its discovery and on the other has earlier threatened industry with higher taxes. A discovery is one thing. Economically producible reserves include calculations for tax and regulatory policy, stability of the lessor and myriad other risks.
It is to Alaska’s benefit to listen to the likes of Canada’s Fraser Institute (Ref), do its own calculations and honestly ask of itself: “What must we do to attract more investment and become a stable, attractive oil patch where, to investors, a deal is a deal? -dh
Crony Capitalists Exert Unwarranted Influence
President Eisenhower warned his successors, in his 1961 farewell speech (i.e. full text) , that the dangers of a military-industrial complex included, “the acquisition of unwarranted influence.”
The former General, beloved for his personal leadership was largely credited with the final conclusion of the European phase of WWII. Still, he knew of the dangers of unwarranted influence and cautioned citizens to safeguard against such abuse. In that last speech, he said, “Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”
Back in 1961, our government was smaller, our world was a little little more innocent and public policy a little less complex. Yes, we were to see the communizing of Cuba and the cold war with the Soviets was tense and dangerous.
By comparison, we are today in much more danger of falling prey to those exercising unwarranted influence. On the federal side, we are much more highly regulated, which tends to make indentured servants — crony capitalists — of formerly free enterprises, overseen by the massive power of unelected regulators.
Yes, in President Eisenhower’s day children in school said the Pledge of Allegiance to the Flag of the United States. Many home room teachers led their students in prayer before class began. And children were taught that government was the servant of the people.
But the digital age had not been born, Americans still wore their Sunday best on Airline flights and then, there was Dr. Benjamin Spock. Spock’s 1946 book, Common Sense Book of Baby and Child Care, might be recalled as the beginning of “political correctness” and the decline of personal responsibility, wherein he counseled against discipline as opposed to catering to the whims of children.
Spock’s book and lifetime of liberal teaching certainly worked against Eisenhower’s later admonition to beware of business/government corruption that would be discouraged by personal responsibility, integrity and self discipline.
We still feel Spock’s influence today, as a minority want to dictate that their “feelings” justify dictatorship of the majority value system (i.e. loss of freedom: for bathroom privacy, for selling cakes or photography, for mandating a country language, for enforcing immigration laws, for enacting voting identification, for honoring the American flag, for disrupting meetings while disguised as protesters, for conducting sedition while claiming the right of free speech, for obtaining the constitutional guarantee of due process in pursuing natural resource development projects, etc.)
Today, radio and television stations are loathe to criticize the actions of the Federal Communication Commission which has the power to relieve them of their broadcast licenses. Investor owned utilities and pipelines can prosper or fail based on decisions of both elected and appointed officials. Oil companies might provide testimony at hearings that describe to their legislators or regulators the effect of a regulatory proposal, a tax bill or a proposed lease sale; but they must be careful not to sternly criticise a regulatory or statutory change after the decision is made lest they reap the wrath of officials who oversee the granting of future permits and approval of policies that could make or break multi-million dollar investments by shareholders.
A new phenomenon has risen to threaten the role of free enterprise in the United States’ Constitutional Republic. It is the growth of unwarranted influence by this cabal of crony capitalists, environmental activists and our government’s elected and appointed officials.
Here is an example.
- A multi billionaire criticizes the fossil fuel industry and supports international and national activist movements that promote subsidized energy alternatives. Alternative energies, he asserts are a thoughtful response to the pressing dangers of, let’s say, “climate change”.
- He contributes money to politicians and environmental activists persuaded by his rhetoric…prelude to his “solution”.
- He then provides the solution to the coming disaster. The federal government (i.e. taxpayers) should subsidize his production of electric cars; the federal taxpayer should also provide a credit to individuals who buy the celebrated electric vehicles. The billionaire profits. The individual buyer profits. The environmental activists use the growing anti-fossil mantra to raise funds. Because the environmental activists and politicians and a supportive media are complicit in his venture, no one is too concerned with exploding battery problems, for example.
- Since the profit motive depends now on governmental activism, taxpayers must be lulled into believing that their elevated tax bill is justified by the good that tribute provides to the “health of the planet”. In fact, THE ONLY WAY THIS FRAUD CAN BE PERPETRATED ON THE TAXPAYERS, THE ONLY WAY THIS “CRONY BUSINESS” MODEL CAN BE SUSTAINABLE, IS FOR THE DANGERS OF FOSSIL FUELS TO BE CONTINUALLY PROMOTED.
- The subsidized electric car model being successful, the billionaire and his colleagues now have the key to other treasures. Why should taxpayers not provide subsidies to manufacturers of wind generators and solar panels and “smart electricity meters”, additional subsidies to consumers of those products (i.e. which, by the way, often consumes more fossil energy to make than can be saved over the life of the product). Why not mandate corn originated ethanol and require taxpayers to pay corn growing subsidies and require oil companies to buy the high priced fuel additive…with another unintended consequence that every family in America pays not only more taxes and more for fuel, but more for animal farm products (chickens, eggs, etc.) whose corn costs are now higher. (So now, even corn farmers become subsidized crony capitalists, unfairly competing against organic corn and animal product farmers.)
- But it gets worse, as the unwarranted influence spreads…in so many ways:
a. The solar panel manufacturer needs more market power to convince consumers to allow the bulky units to be installed on their roofs. He contributes to politicians in his state and to decision makers in the cities he will be operating. They want to help him but there is a problem. The state’s regulatory commission is bound by law and tradition to make sure the consumer (i.e. the “ratepayer”) gets the best electric service (i.e. or other utility service) for the lowest price while at the same time making sure the utility is given the opportunity but not the guarantee of making a reasonable return of and on its investment. This is referred to as the principle of “just and reasonable” rate making by regulatory commissions.
b. So politicians have a problem. The regulatory commission will not allow the utility to get rates it sees as being unjust and unreasonable. Therefore, if a kilowatt hour of energy can be obtained cheaper from burning coal or natural gas than by solar or wind power, the solar or wind provider cannot make a profit — even with the federal subsidies for the manufacturer and the consumer.
c. But where there is a will, there is a way. The growing alternate energy crowd of crony capitalist companies convince state legislatures that THERE IS A WAY to overcome the “just and reasonable” rate mandate that utility regulators have always used. Simply, since regulatory commissions are “quasi-legislative, quasi-judicial” creations of the legislature, the legislature can, by law, alter their mission.
d. So lobbyists and their political allies have an answer that consumers will not consider an attack on “just and reasonable ratemaking”. They dream up an entirely new concept based on the expanding, politically correct “climate change imperative”. So let’s call the new concept, a “renewable portfolio standard”. Electric utilities, in order to be responsible and responsive to the climate change imperative, must have in their “portfolio” of electrical generation, a mandatory “percent” of alternative energy sources set by law by a certain date. So, if the law says electric utilities must receive no electrons from any coal generating source after 2020, the regulatory commission is not unjust or unreasonable if it approves utility rates based on more expensive sources of electrical generation. Similarly, regulators are ordered by legislatures to mandate that utilities include in their RPS a certain percent of alternate fuels by a certain date. (Personal note: When I was attending a regulatory commissioner meeting in Sacramento several years ago I heard Governor Arnold Schwarzenegger describe his mandate that utilities maintain an RPS of 33% renewables by 2020. Immediately after that presentation, I met with the President of one of the state’s largest utilities and asked him, “how in the world can you obtain that percent of renewables without Wyoming coal generated electricity and with your greater dependence on natural gas generated power?” He said, “I have absolutely no idea, but, thankfully, I’ll be retired by then.”
e. This is where the solar power man and the wind power girl come to the rescue. Their electricity does not come from coal. So the electric utility is forced to cancel its coal generated electric contracts and make new contracts at much higher prices per kilowatt hour from the alternate energy providers.
f. But there are other problems the politicians didn’t anticipate. First, a utility must install a “smart meter” on the home where law requires a utility to pay a homeowner for solar supplied electricity when the home doesn’t need it. In many cases, the utility’s extra cost of micro managing the electrical grid down to the individual home is spread among all ratepayers so that even homeowners not desiring solar installations and smart meters have to pay the utility costs for homeowners who do want that service. Thus, the solar homeowners become satellites of the crony capitalist solar provider in advocating against the utility’s service interests and against the interests of non subsidized homeowners upon whom they depend. For without all the subsidies throughout the system, the home solar systems are completely uneconomic and only those with extra discretionary cash would want to have such a system installed at wholly his own expense. Then…when the wind doesn’t blow or the sun doesn’t shine where does the electricity come from? Coal fired electricity used not only to be cheap, but it was very reliable, too. Day and night, the amount of electricity needed could be counted on. So now the utility has to not only contract with wind and solar crony, subsidized companies, it must also contract for back up electricity. How? It must pay extraordinarily high prices to companies that generate electricity from natural gas-fired turbines–as an example, as long as the gas component will fit, for example, into the 33% RPS California requires by 2020. But that’s not the worst of it. Since the utility can’t anticipate exactly when the sun won’t shine or the wind won’t blow, it has to pay a premium for the natural gas to be available EVEN IF IT IS NOT NEEDED. Not only that, but what happens when a utility has to switch its system — within seconds or micro seconds — to accept natural gas-fired electricity and turn off the line to the solar or wind power source? Elaborate SCADA systems need to be used. The acronym means, Supervisory Control And Data Acquisition. It is a computerized system allowing power dispatchers to quickly manage system power source changes REMOTELY. And that, too, adds to consumer electricity rates. And…the regulatory commission must approve those high rates because the Legislature has made it illegal for a utility to acquire a cheaper source of electricity. And how can any consumer complain? After all, the legislature held hearings before passing the “renewable portfolio standard” (RPS) and there was a lot of supportive testimony by environmental activists and crony lobbyists and hired, climate change expert witnesses.
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What our readers have learned here is that the climate change movement has been created to destroy capitalism and redistribute both wealth and power within states and provinces, within national governments and even worldwide.
We have documented this fraud many times and in many ways. In 2015, we showed that Christiana Figueres, executive secretary of U.N.’s Framework Convention on Climate Change, admitted that the goal of environmental activists is not to save the world from ecological calamity but to destroy capitalism.
We alerted readers that many of the world’s greatest oil companies — some operating in Alaska and Canada — were kow-towing to the assembled Paris Climate Change assembly by creating an “Oil & Gas Climate Initiative“. They undoubtedly thought they would curry favor with European leaders while supporting their natural gas property values at the expense of the beleaguered coal industry, under attack by the Obama White House. We warned that the effort would fail, as enviro-activists would continue to attack both coal and natural gas. We were not wrong. The anarchists, Soros organizers, paid protesters, racial activists and enviro activists, with mainstream media support, and even financial support from foreign gas producers, are fighting gas and oil shale production with every fiber in their little beings.
Here’s Bill Frezza’s 2013 Huffington Post article we didn’t see until today, but which closely tracks and verifies our observations. Here’s Matthew Lau’s Frasier Institute review of renewable energy crony capitalism, Joel Kotkin’s 2012 Forbes article on the subject, along with a 2016 National Review piece by Robert Bryce.
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The Bottom Line: Alaska
We have always held that the proper role of government is to provide essential services and let the invisible hand of supply and demand control the economic development and vitality of a civilization. Alaska has certainly found over the years that state ownership of seafood processing, grain storage, dairy and farm businesses leads to unhappy ends.
Still, politicians seem more attracted to manipulation of the private sector than restraining their energy to providing the essential services to citizens at the lowest cost. One should never forget that the first is fraught with risk, human greed and the lack of accountability while the latter imposes minimal risk on taxpayers, ratepayers and future generations.
Yes, we are sympathetic with the idealistic, well intentioned motivations of legislators. On the federal side, Alaska Senator Lisa Murkowski is strongly supportive of fossil fuel development, but also supports subsidies for alternate, uneconomic sources of energy. We believe all subsides for alternate energy sources should be abandoned, particularly in light of the country’s $20 trillion debt that her children and ours will end up owning.
Another such well intentioned, retired politician, former Alaska State Senator Lesil McGuire, became involved in energy issues and began promoting the idea of Renewable Portfolio Standard goals, government loans and government grants in support of some uneconomic and unworkable alternative energy policies and schemes throughout Alaska.
In this 2010 presentation to the community of Homer, Alaska, McGuire outlines her Alaska energy goal. “We’re asking for 50% of our energy to be renewable by 2025 …,” and an, “…increase in energy efficiency of 10-15% by 2020”.
She noted that there are “…a lotta tools to help us get there…two revolving energy loan programs that are unlike anything else in the United States.” She referred to an Alaska Housing Finance Corporation, $250 million revolving loan fund for retrofitting of public facilities, and a second program for small businesses. She also described various “seed corn” grant programs and stated her hope that, “Alaska can be the renewable energy leader for the country.”
McGuire said Alaska’s renewable program needs to be “holistic”. She said that (as we noted above) regulatory reform would be required to overcome “regulatory hurdles” and emphasized her opinion that “renewable energy is competitive”.
She said that a trip to Iceland had been a life changing experience for her…to see how that northern country had become so energy independent through use of hydroelectric and geothermal resource development.
She ended the presentation with her goal to, “start a movement that will entice the rest of the country to join us and not spend our money overseas.”
We will point out that by 2010 there were ALREADY movements throughout the country to transfer wealth from taxpayers and ratepayers to crony capitalist alternate energy advocates along with the politicians they supported and to enviro-activist organizations with the goal of killing capitalism. In Alaska, one major group coordinating this “climate change, alternate energy wealth transfer” is REAP, the Renewable Energy Alaska Project. No one can be critical of such a non-profit with such noble goals as are expressed here. We would only observe the likelihood that this confederation of renewable supporters would have been unlikely allies had they not envisioned subsidies of all kinds — state, federal and corporate — for their activity.
We are all for renewable energy that survives in the free market. If you want renewables, pay for them yourselves. Don’t coerce your legislator or regulatory body into taking my money to give you in support your dreams, feelings, lifestyles and desires. So REAP, count on us for 100% support the day you proclaim on your web page that you and your members reject any renewable project requiring subsidies of any kind, except freely given personal and corporate donations for the cost of your “not for profit work”.
We hate to argue against good intentions but, going back to Senator McGuire’s life changing experience, we would be remiss in not noting that while Iceland is a nation with absolute sovereignty, Alaska is a less than sovereign state subject to massive federal energy regulation and enviro-activist lawsuits.
More than that, students of energy policy should note that Iceland had the good fortune as a sovereign nation to efficiently harvest two forms of sustainable, reliable energy: geothermal and hydro. That abundant, wholesome, easily harnessed, year-around energy source was only needed to support a population the size of Anchorage, Alaska in an area the size of Kentucky. McGuire’s whole state of Alaska is over twice the size of Texas, with scattered and almost completely undeveloped geothermal resources and very isolated hydro resources whose projects require federal regulatory approval over 5 MWH, or, for less capacity, state approval using the same harsh, federal guidelines.
Yes, we know Iceland and we know Alaska. Alaska is no Iceland.
Consequently, the alternative energy challenges in Alaska are not easy to address as McGuire’s talk would seem to indicate.
If a village has only wind power, it must still buy fuel oil for when the wind doesn’t blow and for when the complicated wind equipment breaks down. And McGuire is talking about over 200 villages of populations of a few dozen to a few hundred, whose human resources and training is limited.
For example, McGuire cites an alternative energy example of biomass and biodiesel production by the Cordova school science program, converting kitchen grease and food scraps into energy. Thanks to one dedicated teacher that GOVERNMENT SUPPORTED program lasted only until he left for a job in Hawaii. A solar panel and bio-conversion equipment, according to the current maintenance supervisor, is still in storage.
So now we see the folly in doling out public money for uneconomic, “not the responsibility of government” projects when both the lawmakers and governors are temporary … and, when even the local people responsible for husbanding the money and project(s) are temporary. (On the other hand, the private enterprise sector is much more permanent: for it spends its own shareholder money, with shareholder oversight no matter what executive comes and goes. There are socialists who will say, ‘well, look at how well some government owned dams have done in Alaska!’ Lucky for them, we’ll never know how such a project might have fared as a private sector effort. We would also stipulate that some not-economically-feasible projects might have to be owned by government if the need is great enough; although there are ways of privatizing even certain government owned projects to assure efficiency and the best use of public capital.)
So much for the hopeful but naive observation that, “alternative energy is competitive”. Well, maybe it is with massive enough subsidies and government oversight and no need to balance cost against benefits.
We asked for a villager in Ruby to tell us what happened to the GOVERNMENT SUPPORTED boat skiff outfitted with a fish wheel generator that provided electric energy from the middle of the Yukon River. We would note that Ruby experiences close to 24 hours of daylight in the summer and the river is frozen in the winter. We haven’t gotten a status report yet from the village. But we’d have to conclude that the fish wheel river generator, while an interesting concept, would have still relied on fuel oil-generated electric power as the village’s main source of reliable energy.
In short, the Trump administration has a challenge on its hands trying to free taxpayers and ratepayers of the horrible burden they have borne over the last decade…to assure the profitability of crony capitalist special interests. After all, that “climate change motivated” cabal has grown to support hundreds of thousands of businesses, “scientists”, politicians, support industries and families.
In Alaska, the legislature is deeply involved in trying to solve a fiscal crisis. Its House of Representatives in the last few days is approaching the challenge of a multi-billion dollar deficit — not by cutting costs — but by increasing spending and proposing new taxes and fees on the private sector. Both houses, being lobbied by special interests are considering “Clean Energy” legislation — we assume at the bidding of organizations like REAP. The Governor continues to support a multi-billion dollar marketing scheme to build a massive, unforgiving, risky $45-60 billion gas pipeline/LNG export project that is currently infeasible. His project bureaucrats just hosted a marketing ‘summit’ in anchorage for some asian visitors, involving sponsorship support from formerly free enterprise support companies and, one local event manager told us, a hired, out-of-state event planner.
We continue to ask to a non-responding bureaucracy: “Who in his right mind could think a $45 billion gas pipeline/LNG project could go well if it were owned by a non-accountable government of temporarily elected and appointed officials?”
Big spending politicians, crony capitalists and related special interests seem to be in control of Alaska’s fate as we close out this week. A House republican minority and the Senate republican majority are valiantly battling to ‘right size’ the 49th state’s budget and strengthen its constitutional spending limit. But will they have the numbers and leadership to succeed against a socialist leaning, governor and house leadership?
We observe that Trump’s White House is facing the same deeply imbedded resistance as are Alaska’s conservative leaders: the challenge of dislodging crony capitalists, activists and community organizers, and their newly co opted support industries.
Truly, capitalism and our Constitutional Republic are at stake as crony capitalist purveyors of unwarranted influence assemble their armies for the final showdown, both nationally and locally.
As true today as then, President Eisenhower’s words both haunt and inspire us, for, “only an alert and knowledgeable citizenry…” assure, “that security and liberty may prosper together”.
We hope this message serves our “alert and knowledgeable” readers.
Bringin’ Home The Bacon…
…good news for a change, for all America, not just Alaska!
Time and time again over the years, the Alaska Oil & Gas Conservation Commission’s (AOGCC) Dan Seamount has convinced the Interstate Oil & Gas Compact Commission (IOGCC) — representing the nation’s oil and gas producing states — to endorse oil & gas development in the Arctic National Wildlife Refuge (ANWR).
Readers will find the newest resolution *16.101″ here: Supporting Hydrocarbon Exploration and Development in a Limited Area of the ANILCA Authorized Coastal Plain of ANWR as Part of the National Energy Policy of the United States of America. Seamount reports the vote count below, with most states voting “yes” to the resolution. California and Colorado voted “no”, while Virginia abstained.
Here are the results below of the vote of the member states present and voting (i.e. out of several dozen actual members) to adopt Resolution 16.101. California – No, Colorado — No, Virginia – Abstain
Alaska – Yes, Arizona – Yes, Arkansas – Yes, Kansas – Yes, Michigan – Yes, Montana – Yes, Nevada – Yes, New Mexico – Yes, North Dakota – Yes, Oklahoma – Yes, Texas – Yes, Utah – Yes, West Virginia – Yes
White House Rejects Alaska Proposal
Petroleum News by Kristen Nelson. …Alaska Gov. Bill Walker has written to President Donald Trump asking for the president’s blessing and for support with federal agencies.
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On the other hand, one of our readers has a report from the Administration’s White House report on infrastructure projects the federal government will support within the states. We don’t see an Alaska project listed. We can’t help but wonder how his state would have fared if the Governor had suggested projects like an access road to Juneau or the Ambler district, or rebuilding the Anchorage Port, or building a new Arctic port in Nome. However, unless we missed something, he focused on requests that the federal government provide certain expediting and financial guarantees to an Alaska gas/LNG project which, at present and for the foreseeable future, is uneconomic. We hope the President’s good judgment prevails and that a bureaucrat controlled, multi-billion dollar LNG project in Alaska not be federally supported or subsidized in any way. -dh
We have often, in well deserved humility, stated in these pages that we invite additions or correction to the facts stated in our reports or, even, in our commentaries.
We are scrupulous about this because the whole reason we began this project over 15 years ago was to provide an archive of northern energy projects, people, maps, presentations, photos, studies, news and commentary, an archive that could be valuable to industry, government, media, academia and the general public.
And if folks take issue with our commentary, they too are invited to provide commentary at the bottom of each posting.
Yes, we have been corrected on occasion and in every case, we have rejoiced that a reader took the time to help us maintain the reputation and reality of a valid northern energy archive.
And, in every case where we have been corrected, we have corrected the offending posting so that the archive reflects the highest standard of accuracy.
So please, if you haven’t considered the value of providing additions or corrections to us in the past, consider doing so now.
And, if you do, know that we’ll rejoice that you took the time.